Hard Assets

Q. I've heard the term *hard assets* with respect to a loan application.  Were they talking about coins or precious metals?

A. Neither.  Hard assets are possessions that are not cash i.e., those that are illiquid or cannot be quickly converted into cash. This category includes cars, jewelry, electronics and real estate. Businesses are also often considered hard assets.  For mortgage loan applications, hard assets do not need to be disclosed unless necessary to show positive net worth. This is especially the case with real estate or vehicles that have outstanding loans against them. Obviously, if the borrower has a mortgage loan reporting as a liability on his or her credit report, that debt should be offset by the value of the property. Otherwise, the borrower may generate a negative net worth.

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